Talking Points:
- The DXY Index has paused after rallying into the November 2017 swing low and January 2018 swing high, 92.50/65.
- The April US ISM Services report due out at 10 EDT/14 GMT should provide significant insight into what to expect for tomorrow's April US Nonfarm Payrolls report.
- Retail traders are net-long EUR/USD, GBP/USD, USD/JPY - a mixed but improving outlook for the US Dollar.
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In the wake of the May FOMC meeting, the US Dollar (via the DXY Index) has seen its run of 10 gains in 12 days pause at resistance, the 92.50/65 zone produced by the November 2017 swing lows and January 2018 swing highs.
But given the current momentum profile - price trading off of the daily 5-EMA throughout the rally, with price above the daily 8-, 13-, and 21-EMA envelope while MACD and Slow Stochastics point higher in bulish territory - any US Dollar weakness is currently being viewed as an opportunity to buy-the-dip.
With the May FOMC meeting impact quickly fading into the background (see a full analysis of the key points here), attention is rapidly turning to the April US Nonfarm Payrolls report set to be released tomorrow. The next key puzzle piece will be revealed today in the form of the April US ISM Services report, due out at 10 EDT/14 GMT.
Between the ADP Employment Change survey and the ISM Services report, we'll have a fairly strong insight into where the April US jobs figure should land tomorrow. A simple linear regression of the headline NFP figure against the ADP and ISM reports over the past 10-years reveals an r-squared of 0.89; in other words, 89% of the variation in the jobs figure can be explained by those two reports.
See the above video for technical considerations in the DXY Index, EUR/USD, GBP/USD, AUD/USD, NZD/USD, Gold, and the S&P 500.
Read more: US Dollar Drops as FOMC Turns Hawkish on Inflation, Dovish on Growth
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--- Written by Christopher Vecchio, CFA, Senior Currency Strategist
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